The decline of cross-shareholdings among listed Japanese companies and the corresponding increase in foreign ownership has been cited as a force for change. According to brokerage Nomura Holdings, cross-shareholdings fell to a record low at the end of March 2011 of 11.1 percent of total outstanding shares – the lowest figure since the survey started in 1991.
Similarly, the proportion of Japanese shares held by foreign investors was at 26.7 percent, outweighing the 20.3 percent held by Japan’s 1.12 million individual shareholders, according to the TSE.
Yet for former Olympus boss Woodford, the decline in Japanese cross-shareholdings cannot happen too quickly.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
In an interview conducted in early March 2012, he described the system as “an incestuous, cosy club of institutional shareholders.”
“The worst thing for Japan is the cross-shareholdings, because the unwritten rule is you don’t criticize and you don’t sell,” he said.
“It’s also harmful for Japan because it means you have mediocre boards staying there until people die or retire. There’s no hostile takeover within Japan so there’s no creative destruction.”
A 30-year veteran of the Japanese camera and endoscope maker, the Englishman became the first non-Japanese to be appointed Olympus CEO after a successful career with the company in Europe.
Yet Woodford was axed after demanding the resignation of then chairman Tsuyoshi Kikukawa and another executive over payments made for overseas acquisitions which “destroyed over U.S. $1.5 billion in shareholder value.”
Described by the Wall Street Journal as “one of the biggest and longest-running loss-hiding arrangements in Japanese corporate history,” the scandal over the tobashi (loss-hiding) cover-up saw billions of dollars wiped from Olympus’ market value and led to the arrest of Kikukawa and other executives, along with the removal of the entire company board.
Woodford abandoned a campaign to win back a board seat after failing to gain the backing of Japanese institutional investors, despite strong support from foreign shareholders including Southeastern Asset Management. In May, he settled an unfair dismissal claim against the company filed in Britain, reportedly for around 10 million pounds.